Hollywood blasts U.K. competition watchdog

Studios defend their contracts with BSkyB

Hollywood studios have hit back at Blighty’s Competition Commission, which has provisionally ruled that their movie contracts with satcaster BSkyB are anti-competitive.

In submissions released on Thursday, Paramount, NBCUniversal, 20th Century Fox, Disney, Warners and Sony criticized the watchdog for failing to accurately measure the competition in the U.K., particularly from over-the-top services such as Lovefilm and new entrant Netflix, both of which are vying for exclusive pay TV window rights from film distributors along with rival cablers.

The Competition Commission, which has been investigating the U.K. pay TV market, ruled in August that not only were BSkyB’s contracts with the majors a barrier to entry for potential rivals such as cabler Virgin Media and telco BT but also that the satcaster should be barred from signing exclusive deals with studios for movie rights in the first subscription pay TV window.

Rival operators say they cannot make serious profits from films because they can only show Hollywood movies for a 45-day pay-per-view window after theatrical release, and not on a subscription basis.

After that point, the first subscription pay TV window kicks in, meaning BSkyB can show films exclusively for 15 months

Fox blasted the Commission’s results, saying that it “failed to recognize the significance of one of the most important new forms of content distribution that is likely to affect the U.K. market: Internet distribution.”

“NBCUniversal believes that the current situation, in which negotiations for first-subscription pay TV window rights typically commence up to two years prior to those rights becoming available, provides a sufficient amount of time for all prospective buyers to evaluate and submit credible offers,” the company said.

Disney, meanwhile, stated that its current first-subscription pay TV window deal with BSkyB came after a competitive rights auction.

The Competition Commission proposed a number of possible remedies, including that BSkyB permits services such as Netflix and Lovefilm access to its satellite set-top box.

Par and NBCU favored this proposal with Par saying the option “has the best chance of being effective in resolving the competition problem.”

In August, the Commission found that because BSkyB had twice as many subscribers — 10 million — as all other pay TV retailers put together, it gave BSkyB an advantage in movie rights acquisitions, which rivals could not match.

A final ruling on the issue is expected from the Competition Commission in August.